Gold and Silver reserves, accounting for more than 60 % of the worlds international reserves, are currency assets held in reserve by central banks. These assets are mostly gold, although some countries also hold silver reserves. Gold and silver reserves, along with other assets, can provide backing for the currency of the nation and in case of a major financial crisis, countries can liquidate these assets, providing a life-line for their finances.
The central Banks gold and silver reserves have been steadily increasing over the years. As of January 2018, the total world gold reserves stood at 30,660 metric tons and the total silver reserves stood at 1,053,351 metric tons. The United States, Germany, Italy, France and China together account for almost 60 % of the total gold reserves. The largest silver holder is India, which accounts for almost 66 % of the total silver reserves.
Because of the high demand for gold and silver, many countries are slowly buying reserves to stabilize their currencies. This is being done in order to protect the currency exchange rates and maintain the monetary value in the international markets. Russia, India, China and Switzerland are among the nations which have been increasing their gold and silver reserves.
In recent years, the gold and silver market prices have been volatile with prices increasing and dropping. This has affected the countries which hold these reserves and the central Banks. This is because if the prices drop, the value of the central banks’ gold and silver reserves decline and conversely, when the prices go up, so does the value of their reserves.
The demand for gold and silver reserves is also driven by the demand from the industrial sector. Gold and silver are used in instruments such as coins, jewelry, electronics and medicine along with many other industries which make use of these metals. Buying gold and silver reserves helps to satisfy this demand when there is a shortage.
Overall, gold and silver reserves provide a safe haven for investors and ensure stability in the international market for currencies. This makes them a valuable asset for countries which are looking to guard their currency against volatility. Central banks across the world have been buying gold and silver reserves as a way to safeguard their finances and as of today these assets account for more than 60 % of the world’s international reserves.